1998 Equity Compensation Plan - Internet Capital Group LLC
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INTERNET CAPITAL GROUP, L.L.C.
1998 EQUITY COMPENSATION PLAN
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The purpose of the Internet Capital Group, L.L.C. 1998 Equity Compensation
Plan (the "Plan") is to provide (i) designated employees of Internet Capital
Group, L.L.C. (the "Company") and its subsidiaries, (ii) certain advisors who
perform services for the Company or its subsidiaries and (iii) non-employee
members of the Board of Managers of the Company (the "Board") with the
opportunity to receive grants of incentive stock options, nonqualified options,
unit appreciation rights, restricted units and performance units. The Company
believes that the Plan will encourage the participants to contribute materially
to the growth of the Company, thereby benefiting the Company's members, and will
align the economic interests of the participants with those of the members.
1. Administration
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(a) Committee. The Plan shall be administered and interpreted by a
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committee appointed by the Board (the "Committee"). Prior to the Company
becoming a "Reporting Company" as described in Section 23(b), the Board may
exercise any power or authority of the Committee under the Plan and, in such
case, references to the Committee hereunder, as they relate to Plan
administration, shall be deemed to include the Board as a whole. After the
Company becomes a Reporting Company, the Committee shall consist of two or more
persons appointed by the Board, all of whom may be "outside directors" as
defined under section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and related Treasury regulations and may be "non-employee
directors" as defined under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) Committee Authority. The Committee shall have the sole authority
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to (i) determine the individuals to whom grants shall be made under the Plan,
(ii) determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, and (iv)
deal with any other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
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authority to administer and interpret the Plan, to make factual determinations,
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan, and
need not be uniform as to similarly situated individuals.
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2. Grants
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Awards under the Plan may consist of grants of (1) on or after the Company
becomes a Reporting Company, incentive stock options as described in Section 5
("Incentive Stock Options"), (2) Nonqualified Options as described in Section 5
("Nonqualified Options") (Incentive Stock Options and Nonqualified Options are
collectively referred to as "Options"), (3) restricted units as described in
Section 6 ("Restricted Units"), (4) unit appreciation rights as described in
Section 7 ("UARs"), and (5) performance units as described in Section 8
("Performance Units") (hereinafter collectively referred to as "Grants"). All
Grants shall be subject to the terms and conditions set forth herein and to such
other terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the individual
in a grant instrument (the "Grant Instrument") or an amendment to the Grant
Instrument. The Committee shall approve the form and provisions of each Grant
Instrument. Grants under a particular Section of the Plan need not be uniform
as among the grantees.
3. Units Subject to the Plan
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(a) Units Authorized. For purposes of the Plan, a Unit means (i)
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prior to the Company becoming a Reporting Company, one Membership Interest of
the Company and (ii) on and after the Company becomes a Reporting Company, one
or more units of equity interest in the Company as determined pursuant to
Section 3(b). Subject to the adjustment specified below, the aggregate number of
Units of the Company that may be issued or transferred under the Plan is
10,000,000 Units. The maximum aggregate number of Units that shall be subject to
Grants made under the Plan to any individual during any calendar year shall be
2,500,000 Units. The Units may be authorized but unissued Units or reacquired
Units, including Units purchased by the Company on the open market for purposes
of the Plan. If and to the extent Options or UARs granted under the Plan
terminate, expire, or are canceled, forfeited, exchanged or surrendered without
having been exercised, or if any Restricted Units or Performance Units are
forfeited, the Units subject to such Grants shall again be available for
purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of
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Units outstanding (i) by reason of a dividend, spinoff, recapitalization, split
or combination or exchange of Units, (ii) by reason of a merger, reorganization
or consolidation in which the Company is the surviving corporation, (iii) by
reason of a reclassification or change in par value, (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Units of the Company as
a class without the Company's receipt of consideration, or (v) by reason of the
Company being a Reporting Company, or if the value of outstanding Units is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of Units available
for Grants, the maximum number of Units that any individual participating in the
Plan may be granted in any year, the number of Units covered by outstanding
Grants, the kind of Units issued under the Plan, and the price per Unit or the
applicable market value of such Grants shall be appropriately adjusted by the
Committee to reflect any increase or decrease in the number of, or change in the
kind or value of, issued Units to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such Grants; provided,
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however, that any fractional Units resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
4. Eligibility for Participation
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(a) Eligible Persons. All employees of the Company and its
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subsidiaries ("Employees"), including Employees who are officers or members of
the Board, and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Advisors who perform
services to the Company or any of its subsidiaries ("Key Advisors") shall be
eligible to participate in the Plan if the Key Advisors render bona fide
services and such services are not in connection with the offer or sale of
securities in a capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the Employees,
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Non-Employee Directors and Key Advisors to receive Grants and shall determine
the number of Units subject to a particular Grant in such manner as the
Committee determines. Employees, Key Advisors and Non-Employee Directors who
receive Grants under this Plan shall hereinafter be referred to as "Grantees."
5. Granting of Options
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(a) Number of Units. The Committee shall determine the number of
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Units that will be subject to each Grant of Options to Employees, Non-Employee
Directors and Key Advisors.
(b) Type of Option and Price.
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(i) On or after the Company becomes a Reporting Company, the
Committee may grant Incentive Stock Options that are intended to qualify as
"incentive stock options" within the meaning of section 422 of the Code or
Nonqualified Options that are not intended so to qualify or any combination of
Incentive Stock Options and Nonqualified Options, all in accordance with the
terms and conditions set forth herein. Incentive Stock Options may be granted
only to Employees. Nonqualified Options may be granted to Employees, Non-
Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Units subject
to an Option shall be determined by the Committee and may be equal to, greater
than, or less than the Fair Market Value (as defined below) of a Unit on the
date the Option is granted; provided, however, that (x) the Exercise Price of an
Incentive Stock Option shall be equal to, or greater than, the Fair Market Value
of a Unit on the date the Incentive Stock Option is granted and (y) an Incentive
Stock Option may not be granted to an Employee who, at the time of grant, owns
Units possessing more than 10 percent of the total combined voting power of all
Units and other classes of stock of the Company or any parent or subsidiary of
the Company, unless the Exercise Price per Unit is not less than 110% of the
Fair Market Value of a Unit on the date of grant.
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(iii) If the Units are publicly traded, then the Fair Market
Value per Unit shall be determined as follows: (x) if the principal trading
market for the Units is a national securities exchange or the Nasdaq National
Market, the last reported sale price thereof on the relevant date or (if there
were no trades on that date) the latest preceding date upon which a sale was
reported, or (y) if the Units are not principally traded on such exchange or
market, the mean between the last reported "bid" and "asked" prices of a Unit on
the relevant date, as reported on Nasdaq or, if not so reported, as reported by
the National Daily Quotation Bureau, Inc. or as reported in a customary
financial reporting service, as applicable and as the Committee determines. If
the Units are not publicly traded or, if publicly traded, are not subject to
reported transactions or "bid" or "asked" quotations as set forth above, the
Fair Market Value per Unit shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each
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Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee who,
at the time of grant, owns Units possessing more than 10 percent of the total
combined voting power of all Units and other classes of stock of the Company, or
any parent or subsidiary of the Company, may not have a term that exceeds five
years from the date of grant.
(d) Exercisability of Options.
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(i) Options shall become exercisable in accordance with such
terms and conditions, consistent with the Plan, as may be determined by the
Committee and specified in the Grant Instrument or an amendment to the Grant
Instrument. The Committee may accelerate the exercisability of any or all
outstanding Options at any time for any reason.
(ii) Notwithstanding the foregoing, the Option may, but need
not, include a provision whereby the Grantee may elect at any time while an
Employee, Non-Employee Director or Key Advisor to exercise the Option as to any
part or all of the Units subject to the Option prior to the full vesting of the
Option. Any unvested Units so purchased shall be subject to a repurchase right
in favor of the Company, with the repurchase price to be equal to the lesser of
(x) the original purchase price or (y) the Fair Market Value of the Units, or to
any other restriction the Committee determines to be appropriate.
(e) Termination of Employment, Disability or Death.
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(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by the Company as an Employee, Key Advisor or
member of the Board. In the event that a Grantee ceases to be employed by the
Company for any reason other than "disability," death or "termination for
cause," any Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within 90 days after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the
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Grantee's Options that are not otherwise exercisable as of the date on which the
Grantee ceases to be employed by the Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by the
Company on account of a "termination for cause" by the Company, any Option held
by the Grantee shall terminate as of the date the Grantee ceases to be employed
by the Company.
(iii) In the event the Grantee ceases to be employed by the
Company because the Grantee is "disabled," any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be employed by the Company (or
within such other period of time as may be specified by the Committee), but in
any event no later than the date of expiration of the Option term. Any of the
Grantee's Options which are not otherwise exercisable as of the date on which
the Grantee ceases to be employed by the Company shall terminate as of such
date.
(iv) If the Grantee dies while employed by the Company or
within 90 days after the date on which the Grantee ceases to be employed on
account of a termination of employment specified in Section 5(e)(i) above (or
within such other period of time as may be specified by the Committee), any
Option that is otherwise exercisable by the Grantee shall terminate unless
exercised within one year after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options that are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by the Company shall
terminate as of such date.
(v) For purposes of Sections 5(e), 6, 7, 8 and 13:
(A) "Company," when used in the phrase "employed by the
Company," shall mean the Company and its parent and subsidiary
corporations.
(B) "Employed by the Company" shall mean employment or service
as an Employee, Key Advisor or member of the Board (so that, for purposes
of exercising Options and UARs and satisfying conditions with respect to
Restricted Units and Performance Units, a Grantee shall not be considered
to have terminated employment or service until the Grantee ceases to be an
Employee, Key Advisor and member of the Board), unless the Committee
determines otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code.
(D) "Termination for cause" shall mean, except to the extent
specified otherwise by the Committee, a finding by the Committee that (1)
the Grantee has breached his or her employment, service, noncompetition,
nonsolicitation or other similar contract with the Company or its parent
and subsidiary corporations, (2) has been engaged in disloyalty to the
Company or its parent and subsidiary corporations, including, without
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limitation, fraud, embezzlement, theft, commission of a felony or
dishonesty in the course of his or her employment or service, (3) has
disclosed trade secrets or confidential information of the Company or its
parents and subsidiary corporations to persons not entitled to receive such
information or (4) has entered into competition with the Company or its
parent or Subsidiary Corporations. Notwithstanding the foregoing, if the
Grantee has an employment agreement with the Company defining "termination
for cause," then such definition shall supersede the foregoing definition.
(vi) In the event a Grantee's employment is terminated for cause,
in addition to the immediate termination of all Grants, the Grantee shall
automatically forfeit all Units underlying any exercised portion of an Option
for which the Company has not yet delivered the certificates, upon refund by the
Company of the Exercise Price paid by the Grantee for such Units.
(f) Exercise of Options. A Grantee may exercise an Option that has
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become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y) by
delivering Units owned by the Grantee for the period necessary to avoid a charge
to the Company's earnings for financial reporting purposes (including Units
acquired in connection with the exercise of an Option, subject to such
restrictions as the Committee deems appropriate) and having a Fair Market Value
on the date of exercise equal to the Exercise Price, or (z) by such other method
as the Committee may approve, including, after the Company becomes a Reporting
Company, payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board; provided, that, for purpose of
assisting an Optionee to exercise an Option, the Company may make loans to the
Optionee or guarantee loans made by third parties to the Optionee, on such terms
and conditions as the Committee may authorize. Units used to exercise an Option
shall have been held by the Grantee for the requisite period of time to avoid
adverse accounting consequences to the Company with respect to the Option. The
Grantee shall pay the Exercise Price and the amount of any withholding tax due
(pursuant to Section 10) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
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shall provide that, if the aggregate Fair Market Value of the Units on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan or any
other equity compensation plan of the Company or a parent or subsidiary, exceeds
$100,000, then the option, as to the excess, shall be treated as a Nonqualified
Option. An Incentive Stock Option shall not be granted to any person who is not
an Employee of the Company or a parent or subsidiary (within the meaning of
section 424(f) of the Code).
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6. Restricted Unit Grants
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The Committee may issue or transfer Units to an Employee, Non-Employee
Director or Key Advisor under a Grant of Restricted Units, upon such terms as
the Committee deems appropriate. The following provisions are applicable to
Restricted Units:
(a) General Requirements. Units issued or transferred pursuant to
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Restricted Unit Grants may be issued or transferred for consideration or for no
consideration, as determined by the Committee. The Committee may establish
conditions under which restrictions on Restricted Units shall lapse over a
period of time or according to such other criteria as the Committee deems
appropriate. The period of time during which the Restricted Units will remain
subject to restrictions will be designated in the Grant Instrument as the
"Restriction Period."
(b) Number of Units. The Committee shall determine the number of
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Restricted Units to be issued or transferred and the restrictions applicable to
such Grant.
(c) Requirement of Employment. If the Grantee ceases to be employed
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by the Company (as defined in Section 5(e)(v)(B)) during a period designated in
the Grant Instrument as the Restriction Period, or if other specified conditions
are not met, the Restricted Unit Grant shall terminate as to all Units covered
by the Grant as to which the restrictions have not lapsed, and those Units must
be immediately returned to the Company. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Certificate. During the
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Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the Restricted Units except as permitted under Section 11.
Each certificate for Restricted Units shall contain a legend giving appropriate
notice of the restrictions in the Grant. The Grantee shall be entitled to have
the legend removed from the certificate covering the Restricted Units subject to
restrictions when all restrictions on such Units have lapsed. The Committee may
determine that the Company will not issue certificates for Restricted Units
until all restrictions on such Units have lapsed, or that the Company will
retain possession of certificates for Restricted Units until all restrictions on
such Units have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
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determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote Restricted Units and to receive any dividends or other
distributions paid on such Units, subject to any restrictions deemed appropriate
by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted
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Units shall lapse upon the expiration of the applicable Restriction Period and
the satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Restricted Unit Grants, that the restrictions shall
lapse without regard to any Restriction Period.
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7. Unit Appreciation Rights
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(a) General Requirements. The Committee may grant unit appreciation
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rights ("UARs") to an Employee, Non-Employee Director or Key Advisor separately
or in tandem with any Option (for all or a portion of the applicable Option).
Tandem UARs may be granted either at the time the Option is granted or at any
time thereafter while the Option remains outstanding; provided, however, that,
in the case of an Incentive Stock Option, UARs may be granted only at the time
of the Grant of the Incentive Stock Option. The Committee shall establish the
base amount of the UAR at the time the UAR is granted. Unless the Committee
determines otherwise, the base amount of each UAR shall be equal to the per Unit
Exercise Price of the related Option or, if there is no related Option, the Fair
Market Value of a Unit as of the date of Grant of the UAR.
(b) Tandem UARs. In the case of tandem UARs, the number of UARs
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granted to a Grantee that shall be exercisable during a specified period shall
not exceed the number of Units that the Grantee may purchase upon the exercise
of the related Option during such period. Upon the exercise of an Option, the
UARs relating to the Units covered by such Option shall terminate. Upon the
exercise of UARs, the related Option shall terminate to the extent of an equal
number of Units.
(c) Exercisability. An UAR shall be exercisable during the period
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specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding UARs at
any time for any reason. UARs may only be exercised while the Grantee is
employed by the Company or during the applicable period after termination of
employment as described in Section 5(e). A tandem UAR shall be exercisable only
during the period when the Option to which it is related is also exercisable.
No UAR may be exercised for cash by an executive officer or director of the
Company or any of its subsidiaries who is subject to Section 16 of the Exchange
Act, except in accordance with Rule 16b-3 under the Exchange Act.
(d) Value of UARs. When a Grantee exercises UARs, the Grantee shall
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receive in settlement of such UARs an amount equal to the value of the stock
appreciation for the number of UARs exercised, payable in cash, Units or a
combination thereof. The stock appreciation for a UAR is the amount by which
the Fair Market Value of the underlying Unit on the date of exercise of the UAR
exceeds the base amount of the UAR as described in Subsection (a).
(e) Form of Payment. The Committee shall determine whether the
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appreciation in a UAR shall be paid in the form of cash, Units, or a combination
of the two, in such proportion as the Committee deems appropriate. For purposes
of calculating the number of Units to be received, Units shall be valued at
their Fair Market Value on the date of exercise of the UAR. If Units are to be
received upon exercise of a UAR, cash shall be delivered in lieu of any
fractional Unit.
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8. Performance Units
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(a) General Requirements. The Committee may grant performance units
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("Performance Units") to an Employee or Key Advisor. Each Performance Unit
shall represent the right of the Grantee to receive an amount based on the value
of the Performance Unit, if performance goals established by the Committee are
met. A Performance Unit shall be based on the Fair Market Value of a Unit or on
such other measurement base as the Committee deems appropriate. The Committee
shall determine the number of Performance Units to be granted and the
requirements applicable to such Units.
(b) Performance Period and Performance Goals. When Performance Units
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are granted, the Committee shall establish the performance period during which
performance shall be measured (the "Performance Period"), performance goals
applicable to the Units ("Performance Goals"), and such other conditions of the
Grant as the Committee deems appropriate. Performance Goals may relate to the
financial performance of the Company or its operating units, the performance of
Units, individual performance, or such other criteria as the Committee deems
appropriate.
(c) Payment with respect to Performance Units. At the end of each
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Performance Period, the Committee shall determine to what extent the Performance
Goals and other conditions of the Performance Units have been met and the
amount, if any, to be paid with respect to the Performance Units. Payments with
respect to Performance Units shall be made in cash, in Units, or in a
combination of the two, as determined by the Committee.
(d) Requirement of Employment. If the Grantee ceases to be employed
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by the Company (as defined in Section 5(e)(v)(B)) during a Performance Period,
or if other conditions established by the Committee are not met, the Grantee's
Performance Units shall be forfeited. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems appropriate.
9. Qualified Performance-Based Compensation.
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(a) Designation as Qualified Performance-Based Compensation. The
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Committee may determine that Performance Units or Restricted Units granted to an
Employee shall be considered "qualified performance-based compensation" under
section 162(m) of the Code. The provisions of this Section 9 shall apply to
Grants of Performance Units and Restricted Units that are to be considered
"qualified performance-based compensation" under section 162(m) of the Code.
(b) Performance Goals. When Performance Units or Restricted Units
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that are to be considered "qualified performance-based compensation" are
granted, the Committee shall establish in writing (i) the objective performance
goals that must be met in order for restrictions on the Restricted Units to
lapse or amounts to be paid under the Performance Units, (ii) the Performance
Period during which the performance goals must be met, (iii) the threshold,
target and maximum amounts that may be paid if the performance goals are met,
and (iv) any other
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conditions, including without limitation provisions relating to death,
disability, other termination of employment or Reorganization, that the
Committee deems appropriate and consistent with the Plan and section 162(m) of
the Code. The performance goals may relate to the Employee's business unit or
the performance of the Company and its subsidiaries as a whole, or any
combination of the foregoing. The Committee shall use objectively determinable
performance goals based on one or more of the following criteria: Unit price,
earnings per Unit, net earnings, operating earnings, return on assets,
shareholder return, return on equity, growth in assets, unit volume, sales,
market share, or strategic business criteria consisting of one or more
objectives based on meeting specific revenue goals, market penetration goals,
geographic business expansion goals, cost targets or goals relating to
acquisitions or divestitures.
(c) Establishment of Goals. The Committee shall establish the
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performance goals in writing either before the beginning of the Performance
Period or during a period ending no later than the earlier of (i) 90 days after
the beginning of the Performance Period or (ii) the date on which 25% of the
Performance Period has been completed, or such other date as may be required or
permitted under applicable regulations under section 162(m) of the Code. The
performance goals shall satisfy the requirements for "qualified performance-
based compensation," including the requirement that the achievement of the goals
be substantially uncertain at the time they are established and that the goals
be established in such a way that a third party with knowledge of the relevant
facts could determine whether and to what extent the performance goals have been
met. The Committee shall not have discretion to increase the amount of
compensation that is payable upon achievement of the designated performance
goals.
(d) Maximum Payment. If Restricted Units, or Performance Units
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measured with respect to the fair market value of the Company's Units, are
granted, not more than 2,500,000 Units may be granted to an Employee under the
Performance Units or Restricted Units for any Performance Period. If
Performance Units are measured with respect to other criteria, the maximum
amount that may be paid to an Employee with respect to a Performance Period is
$2,000,000.
(e) Announcement of Grants. The Committee shall certify and announce
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the results for each Performance Period to all Grantees immediately following
the announcement of the Company's financial results for the Performance Period.
If and to the extent that the Committee does not certify that the performance
goals have been met, the grants of Restricted Units or Performance Units for the
Performance Period shall be forfeited.
10. Withholding of Taxes
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(a) Required Withholding. All Grants under the Plan shall be subject
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to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid
in cash, or from other wages paid to the Grantee, any federal, state or local
taxes required by law to be withheld with respect to such Grants. In the case
of Options and other Grants paid in Units, the Company may require the Grantee
or other person receiving such Units to pay to the Company the amount of any
such taxes that the Company is required to withhold with respect to such Grants,
or the Company may
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deduct from other wages paid by the Company the amount of any withholding taxes
due with respect to such Grants.
(b) Election to Withhold Units. If the Committee so permits, a
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Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option, UAR, Restricted Units or Performance Units paid in
Company Units by having Units withheld up to an amount that does not exceed the
Grantee's maximum marginal tax rate for federal (including FICA), state and
local tax liabilities. The election must be in a form and manner prescribed by
the Committee and shall be subject to the prior approval of the Committee.
11. Transferability of Grants
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(a) Except as provided in Section 11(b), only the Grantee may
exercise rights under a Grant during the Grantee's lifetime. A Grantee may not
transfer those rights except by will or by the laws of descent and distribution.
When a Grantee dies, the personal representative or other person entitled to
succeed to the rights of the Grantee ("Successor Grantee") may exercise such
rights. A Successor Grantee must furnish proof satisfactory to the Company of
his or her right to receive the Grant under the Grantee's will or under the
applicable laws of descent and distribution.
(b) Transfer of Nonqualified Options. The Committee may provide, in a
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Grant Instrument, that a Grantee may transfer Nonqualified Options to family
members or other persons or entities according to such terms as the Committee
may determine; provided that the Grantee receives no consideration for the
transfer of an Option and the transferred Option shall continue to be subject to
the same terms and conditions as were applicable to the Option immediately
before the transfer.
12. Right of First Refusal
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Prior to a Public Offering, as defined in Section 23(c), if at any time an
individual desires to sell, encumber, or otherwise dispose of Units distributed
to him under this Plan, the individual shall first offer the Units to the
Company by giving the Company written notice disclosing: (a) the name of the
proposed transferee of the Units; (b) the certificate number and number of Units
proposed to be transferred or encumbered; (c) the proposed price; (d) all other
terms of the proposed transfer; and (e) a written copy of the proposed offer.
Within 30 days after receipt of such notice, the Company shall have the option
to purchase all or part of such Units at the same price and on the same terms as
contained in such notice.
In the event the Company (or a shareholder, as described below) does not
exercise the option to purchase Units, as provided above, the individual shall
have the right to sell, encumber or otherwise dispose of his Units on the terms
of the transfer set forth in the written notice to the Company, provided such
transfer is effected within 30 days after the expiration of the option period.
If the transfer is not effected within such period, the Company must again be
given an option to purchase, as provided above.
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<PAGE>
The Board, in its sole discretion, may waive the Company's right of first
refusal pursuant to this Section 12 and the Company's repurchase right pursuant
to Section 13 below. If the Company's right of first refusal or repurchase
right is so waived, the Board may, in its sole discretion, pass through such
right to the remaining members of the Company in the same proportion that each
shareholder's Unit ownership bears to the Unit ownership of all the members of
the Company, as determined by the Board. To the extent that a shareholder has
been given such right and does not purchase his or her allotment, the other
members shall have the right to purchase such allotment on the same basis.
On and after a Public Offering, the Company shall have no further right to
purchase Units under this Section 12 and Section 13 below, and its limitations
shall be null and void.
Notwithstanding the foregoing, the Committee may require that a Grantee
execute a shareholder's agreement, with such terms as the Committee deems
appropriate, with respect to any Unit distributed pursuant to this Plan. Such
agreement may provide that the provisions of this Section 12 and Section 13
below shall not apply to such Units.
13. Purchase by the Company
-----------------------
Unless otherwise determined by the Board or Committee at or after grant, in
the event of the Optionee's termination of employment or performance of services
for the Company, the Company shall have the right to repurchase all Units issued
or to be issued to the Optionee under this Plan at Fair Market Value but not
less than the Optionee's cost. In the event that the Board or Committee
determines in good faith that the Optionee has materially breached any non-
compete or confidentiality agreement with the Company after termination of his
or her status as an Employee or Consultant, the price at which the Company shall
have the right to repurchase such Units shall be equal to the exercise price or
purchase price paid by the Optionee. Any repurchase shall be made in accordance
with accounting rules to avoid adverse accounting treatment.
The Company's right to repurchase shall be exercisable at any time within
one year after the date of Optionee's termination of employment or performance
of service by the delivery of written notice by the Company to such effect to
the Optionee, his executor, administrator or beneficiaries. Within 30 days
after receipt of such notice, the Optionee, his executor, administrator or
beneficiaries shall deliver a certificate or certificates for the shares being
sold, together with appropriate duly signed stock powers transferring such
shares to the Company, and the Company shall deliver to the Optionee, his
executor, administrator or beneficiaries the Company's check in the amount of
the purchase price for the shares being sold.
14. Reorganization of the Company.
------------------------------
(a) Reorganization. As used herein, a "Reorganization" shall be
---------------
deemed to have occurred if the members of the Company approve (or, if
shareholder approval is not required, the Board approves) an agreement providing
for (i) the merger or consolidation of the Company with another corporation
where the members of the Company, immediately prior to the
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merger or consolidation, will not beneficially own, immediately after the merger
or consolidation, Units entitling such members to more than 50% of all votes to
which all members of the surviving corporation would be entitled in the election
of directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), (ii) the sale or other disposition of all
or substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company.
(b) Assumption of Grants. Upon a Reorganization where the Company is
--------------------
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
and UARs that are not exercised shall be assumed by, or replaced with comparable
options or rights by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, in the event
------------------
of a Reorganization, the Committee may take one or both of the following
actions: the Committee may (i) require that Grantees surrender their outstanding
Options and UARs in exchange for a payment by the Company, in cash or Units as
determined by the Committee, in an amount equal to the amount by which the then
Fair Market Value of the Units subject to the Grantee's unexercised Options and
UARs exceeds the Exercise Price of the Options or the base amount of the UARs,
as applicable, or (ii) after accelerating all vesting and giving Grantees an
opportunity to exercise their outstanding Options and UARs, terminate any or all
unexercised Options and UARs at such time as the Committee deems appropriate.
Such surrender or termination shall take place as of the date of the
Reorganization or such other date as the Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the
-----------
contrary, in the event of a Reorganization, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Subsection (b) above) that would make the Reorganization
ineligible for pooling of interests accounting treatment or that would make the
Reorganization ineligible for desired tax treatment if, in the absence of such
right, the Reorganization would qualify for such treatment and the Company
intends to use such treatment with respect to the Reorganization.
15. Change of Control of the Company.
---------------------------------
(a) As used herein, a "Change of Control" shall be deemed to have
occurred if:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) other than Safeguard Scientifics, Inc. or any of its
subsidiaries or affiliates becomes a "beneficial owner" (as defined in Rule 13d-
3 under the Exchange Act), directly or indirectly, of securities of the Company
representing a majority of the voting power of the then outstanding securities
of the Company except where the acquisition is approved by the Board; or
(ii) Any person has commenced a tender offer or exchange offer
for a majority of the voting power of the then outstanding Units of the Company.
(b) Notice and Acceleration. Upon a Change of Control, to the extent
------------------------
the
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<PAGE>
Committee in its sole discretion determines, (i) the Company shall provide
each Grantee with outstanding Grants written notice of such Change of Control,
(ii) all outstanding Options and UARs shall automatically accelerate and become
fully exercisable, (iii) the restrictions and conditions on all outstanding
Restricted Units shall immediately lapse, and (iv) Grantees holding Performance
Units shall receive a payment in settlement of such Performance Units, in an
amount determined by the Committee, based on the Grantee's target payment for
the Performance Period and the portion of the Performance Period that precedes
the Change of Control.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
------------------
subsection (d) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options and UARs in exchange for a payment
by the Company, in cash or Units as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the Units subject to
the Grantee's unexercised Options and UARs exceeds the Exercise Price of the
Options or the base amount of the UARs, as applicable, or (ii) after giving
Grantees an opportunity to exercise their outstanding Options and UARs,
terminate any or all unexercised Options and UARs at such time as the Committee
deems appropriate. Such surrender or termination shall take place as of the
date of the Change of Control or such other date as the Committee may specify.
(c) Committee. The Committee making the determinations under this
---------
Section 15 following a Change of Control must be comprised of the same members
as those on the Committee immediately before the Change of Control. If the
Committee members do not meet this requirement, the automatic provisions of
Subsection (b) of this Section shall apply in the case of such a Change of
Control, and the Committee shall not have discretion to vary them.
(d) Limitations. Notwithstanding anything in the Plan to the
-----------
contrary, in the event of a Change of Control, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
16. Requirements for Issuance or Transfer of Units
----------------------------------------------
(a) Shareholder's Agreement. The Committee may require that a
-----------------------
Grantee execute a shareholder's agreement, with such terms as the Committee
deems appropriate, with respect to any Units distributed pursuant to this Plan.
(b) Limitations on Issuance or Transfer of Units. No Units shall be
--------------------------------------------
issued or transferred in connection with any Grant hereunder unless and until
all legal requirements applicable to the issuance or transfer of such Units have
been complied with to the satisfaction of the Committee. The Committee shall
have the right to condition any Grant made to any Grantee hereunder on such
Grantee's undertaking in writing to comply with such restrictions on his or her
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<PAGE>
subsequent disposition of such Units as the Committee shall deem necessary or
advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such Units may be legended
to reflect any such restrictions. Certificates representing Units issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
17. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Board may amend or terminate the Plan at any time.
---------
(b) Termination of Plan. The Plan shall terminate on the day
-------------------
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the members.
(c) Termination and Amendment of Outstanding Grants. A termination or
-----------------------------------------------
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents. The termination of
the Plan shall not impair the power and authority of the Committee with respect
to an outstanding Grant. Whether or not the Plan has terminated, an outstanding
Grant may be terminated or amended in accordance with the Plan or may be amended
by agreement of the Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document.
------------------
No other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
18. Funding of the Plan
-------------------
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
19. Rights of Participants
----------------------
Nothing in this Plan shall entitle any Employee, Non-Employee Director, Key
Advisor or other person to any claim or right to be granted a Grant under this
Plan. Neither this Plan nor any action taken hereunder shall be construed as
giving any individual any rights to be retained by or in the employ of the
Company or any other employment rights.
20. No Fractional Units
-------------------
No fractional Units shall be issued or delivered pursuant to the Plan or
any Grant. The Committee shall determine whether cash, other awards or other
property shall be issued or paid in
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<PAGE>
lieu of such fractional Units or whether
such fractional Units or any rights thereto shall be forfeited or otherwise
eliminated.
21. Headings
--------
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
22. Effective Date of the Plan; Definition of Terms.
-----------------------------------------------
(a) Effective Date. The Plan shall be effective on October 2, 1998.
--------------
(b) Reporting Company. The provisions of the Plan that refer to the
-----------------
Company becoming a Reporting Company, or that refer to, or are applicable to
persons subject to, Section 16 of the Exchange Act or section 162(m) of the
Code, shall be effective, if at all, upon the initial registration of the Units
under Section 12(g) of the Exchange Act, and shall remain effective thereafter
for so long as such Units are so registered.
(c) Public Offering. All references in the Plan to a Public Offering
---------------
shall refer to the consummation of the first registered public offering of Units
of the Company in a firm commitment underwriting.
23. Miscellaneous
-------------
(a) Grants in Connection with Corporate Transactions and Otherwise.
--------------------------------------------------------------
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan; provided, that the total number of Units issuable upon
exercise of all outstanding options shall not exceed 30% of the then outstanding
Units of the Company unless approved by a two-thirds vote of the members.
Without limiting the foregoing, the Committee may make a Grant to an employee of
another corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted unit grant made by such corporation. The terms and
conditions of the substitute grants may vary from the terms and conditions
required by the Plan and from those of the substituted stock incentives. The
Committee shall prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and UARs
-------------------
and the obligations of the Company to issue or transfer Units under Grants shall
be subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. With respect to persons subject to
Section 16 of the Exchange Act, it is the intent of the Company
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<PAGE>
that the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee
may revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Committee may
also adopt rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Governing Law. The validity, construction, interpretation and
-------------
effect of the Plan and Grant Instruments issued under the Plan shall exclusively
be governed by and determined in accordance with the law of the State of
Delaware.
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